Publisher Summary This chapter surveys issues in positive second-best theory, specifically the th... more Publisher Summary This chapter surveys issues in positive second-best theory, specifically the theory of the optimal pricing of goods produced by public firms—that is, firms whose objective is the maximization of social welfare. It is assumed that these firms, characteristically, display increasing returns to scale. In these situations, first-best optima may require lump-sum taxes and subsidies. In view of the size of the public sector in most industrialized countries, it is difficult to imagine that public activities can be financed without distortionary effects elsewhere in the economy. The chapter assumes perfect possibilities for lump-sum income transfers to focus on the efficiency aspect of optimal pricing. If lump-sum redistribution is impossible, deviations from marginal costs for prices under public control may be motivated by distributional considerations—that is, the government may want to use its excise tax power to improve the income distribution. The chapter provides general formulation that forms a basis for special cases that are analyzed in more detail subsequently. It also discusses the joint decision for the optimal supply of public goods and the pricing problem. Finally, it analyzes some issues in predation and Ramsey pricing in a dynamic context.
... 122-153. NEEDY, C. Regul(ationi-Indulced Distortions. Lexington, Mass.: Lexington Books, 1975... more ... 122-153. NEEDY, C. Regul(ationi-Indulced Distortions. Lexington, Mass.: Lexington Books, 1975.PELES, Y. AND SHESHINSKI, E. "Fair-Rate-of-Return Regulation: Integration of Firms and Joint Production." Mimeographed, The Hebrew University, Jerusalem, Israel, 1974. ...
Page 1. ELSEVIER Journal of Public Economies 64 (1997) 181-205 JOURNAL OF PUBLIC ECONOMICS Privat... more Page 1. ELSEVIER Journal of Public Economies 64 (1997) 181-205 JOURNAL OF PUBLIC ECONOMICS Privatization and the distribution of income in the commons Dagobert L. Brito3'*, Michael D. Intriligator , Eytan Sheshinskic ...
The conventional measure of the burden (deadweight loss) of a tax is static, being applied to a p... more The conventional measure of the burden (deadweight loss) of a tax is static, being applied to a particular point of time. This paper introduces an intertemporal concept of burden, defined as the loss of consumer's surplus, summed with appropriate discounting, over the lifetime of an individual. For comparison of alternative taxes, the short-run and the long-run measures may yield different rankings. In this paper, this comparison is carried out for the interest-income tax.
... EconPapers has moved to http://EconPapers.repec.org! Please update your bookmarks. Relation b... more ... EconPapers has moved to http://EconPapers.repec.org! Please update your bookmarks. Relation between a social welfare function and the gini index of income inequality. Eytan Sheshinski (). Journal of Economic Theory, 1972, vol. 4, issue 1, pages 98-100. ...
IN A RECENT PAPER Solow, Tobin, Weizsacker and Yaari [4] have analyzed the properties of growth e... more IN A RECENT PAPER Solow, Tobin, Weizsacker and Yaari [4] have analyzed the properties of growth equilibria in a one-sector, vintage capital model with a fixed machine-output ratio and with a labor-machine ratio that is an exogenously given, exponentially decreasing function of time. Given constant rates of labor growth and of saving, they have shown that any path of growth equilibrium, starting with an arbitrary capital composition and labor force, converges asymptotically to a unique balanced growth path (whenever such path exists), in which the vintage distribution of capital remains stationary. Previously, Phelps [2] and Uzawa [6] have established the same result for a certain class of neoclassical vintage models in which variation in the amount of labor per unit of capital along some production function is possible at all times (ex-ante as well as eX-poSt).2 This class includes all those production functions for which it never pays to scrap old machines entirely prior to their expiration through wear and tear.3 A member of this class is the CobbDouglas function.4 In this paper we are interested in extending the above result to a neoclassical vintage model in which the length of life of machines (written m) is an economic variable that is determined by equibrium conditions. A condition for balanced growth is now that m should be constant over time. We shall prove that along any growth equilibrium path, m converges asymptotically to its corresponding balanced growth value. As our proof is based to a large extent on that in [4], the argument is presented in outline, rather than complete.
Growth in overall life expectancy is straining the Social Security budget, and the gap in life ex... more Growth in overall life expectancy is straining the Social Security budget, and the gap in life expectancy between the rich and poor is widening. Motivated by these facts, this paper does four things. First, we develop a simple way to summarize the degree of progressivity in a Social Security system. Second, we show that growth in the life expectancy gap over the last few decades unwinds three‐quarters of the progressivity of the Social Security system. Third, we develop simple reforms to Social Security that maintain the progressivity of the system and restore fiscal solvency. Fourth, we estimate the welfare effects of these potential reforms.
Publisher Summary This chapter surveys issues in positive second-best theory, specifically the th... more Publisher Summary This chapter surveys issues in positive second-best theory, specifically the theory of the optimal pricing of goods produced by public firms—that is, firms whose objective is the maximization of social welfare. It is assumed that these firms, characteristically, display increasing returns to scale. In these situations, first-best optima may require lump-sum taxes and subsidies. In view of the size of the public sector in most industrialized countries, it is difficult to imagine that public activities can be financed without distortionary effects elsewhere in the economy. The chapter assumes perfect possibilities for lump-sum income transfers to focus on the efficiency aspect of optimal pricing. If lump-sum redistribution is impossible, deviations from marginal costs for prices under public control may be motivated by distributional considerations—that is, the government may want to use its excise tax power to improve the income distribution. The chapter provides general formulation that forms a basis for special cases that are analyzed in more detail subsequently. It also discusses the joint decision for the optimal supply of public goods and the pricing problem. Finally, it analyzes some issues in predation and Ramsey pricing in a dynamic context.
... 122-153. NEEDY, C. Regul(ationi-Indulced Distortions. Lexington, Mass.: Lexington Books, 1975... more ... 122-153. NEEDY, C. Regul(ationi-Indulced Distortions. Lexington, Mass.: Lexington Books, 1975.PELES, Y. AND SHESHINSKI, E. "Fair-Rate-of-Return Regulation: Integration of Firms and Joint Production." Mimeographed, The Hebrew University, Jerusalem, Israel, 1974. ...
Page 1. ELSEVIER Journal of Public Economies 64 (1997) 181-205 JOURNAL OF PUBLIC ECONOMICS Privat... more Page 1. ELSEVIER Journal of Public Economies 64 (1997) 181-205 JOURNAL OF PUBLIC ECONOMICS Privatization and the distribution of income in the commons Dagobert L. Brito3'*, Michael D. Intriligator , Eytan Sheshinskic ...
The conventional measure of the burden (deadweight loss) of a tax is static, being applied to a p... more The conventional measure of the burden (deadweight loss) of a tax is static, being applied to a particular point of time. This paper introduces an intertemporal concept of burden, defined as the loss of consumer's surplus, summed with appropriate discounting, over the lifetime of an individual. For comparison of alternative taxes, the short-run and the long-run measures may yield different rankings. In this paper, this comparison is carried out for the interest-income tax.
... EconPapers has moved to http://EconPapers.repec.org! Please update your bookmarks. Relation b... more ... EconPapers has moved to http://EconPapers.repec.org! Please update your bookmarks. Relation between a social welfare function and the gini index of income inequality. Eytan Sheshinski (). Journal of Economic Theory, 1972, vol. 4, issue 1, pages 98-100. ...
IN A RECENT PAPER Solow, Tobin, Weizsacker and Yaari [4] have analyzed the properties of growth e... more IN A RECENT PAPER Solow, Tobin, Weizsacker and Yaari [4] have analyzed the properties of growth equilibria in a one-sector, vintage capital model with a fixed machine-output ratio and with a labor-machine ratio that is an exogenously given, exponentially decreasing function of time. Given constant rates of labor growth and of saving, they have shown that any path of growth equilibrium, starting with an arbitrary capital composition and labor force, converges asymptotically to a unique balanced growth path (whenever such path exists), in which the vintage distribution of capital remains stationary. Previously, Phelps [2] and Uzawa [6] have established the same result for a certain class of neoclassical vintage models in which variation in the amount of labor per unit of capital along some production function is possible at all times (ex-ante as well as eX-poSt).2 This class includes all those production functions for which it never pays to scrap old machines entirely prior to their expiration through wear and tear.3 A member of this class is the CobbDouglas function.4 In this paper we are interested in extending the above result to a neoclassical vintage model in which the length of life of machines (written m) is an economic variable that is determined by equibrium conditions. A condition for balanced growth is now that m should be constant over time. We shall prove that along any growth equilibrium path, m converges asymptotically to its corresponding balanced growth value. As our proof is based to a large extent on that in [4], the argument is presented in outline, rather than complete.
Growth in overall life expectancy is straining the Social Security budget, and the gap in life ex... more Growth in overall life expectancy is straining the Social Security budget, and the gap in life expectancy between the rich and poor is widening. Motivated by these facts, this paper does four things. First, we develop a simple way to summarize the degree of progressivity in a Social Security system. Second, we show that growth in the life expectancy gap over the last few decades unwinds three‐quarters of the progressivity of the Social Security system. Third, we develop simple reforms to Social Security that maintain the progressivity of the system and restore fiscal solvency. Fourth, we estimate the welfare effects of these potential reforms.
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